The High Cost of Lumber These Days
Ok, it’s not funny anymore. In fact, it has become downright painful. We read about it in the print news and see it everyday on the news networks, the cost of lumber is insane! Not only has the cost skyrocketed during the last eighteen months, but the quality of the available material is not what it used to be. That is if you can even get material at all. We are receiving regular price increase notices, sent to our office from our suppliers and distributors. These price increases are not limited to lumber, but also include roofing and exterior finishing products. During a normal annual building cycle we expect to see at least one moderate price increase. We have already received several price increases in the first quarter of 2021 alone. Lumber was being requoted every two weeks, now it is updated daily.
CNN-Business reported in an article written by Matt Eagen on Thursday, May 6th
“Saw mills can't keep up with demand
Today's shortage has roots in the previous housing boom. New home construction crashed after the housing bubble popped in the mid-2000s. That made sense because the market was badly oversupplied. But the downturn also drove countless sawmills out of business, leaving the industry unprepared for today's surge in demand.
And then Covid happened. Sawmills eased output last spring in anticipation of another bust and as they grappled with heath restrictions.
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"There was a great fear among sawmills to prepare for a downturn. When home buying surged, they could not open up capacity quickly enough," said Lawrence Yun, chief economist of the National Association of Realtors.
At the same time, demand for lumber is also being driven by a surge of renovations and expansions of existing homes.
But contractors are having trouble finding and paying for lumber, creating another headache for consumers.
"It's a cost that our members can no longer shoulder the burden on," said David Pekel, CEO of the National Association of the Remodeling Industry. "They have to pass the cost on to the homeowner."“
This graph above puts things into perspective. In just one year, lumber costs have increased over 430%. In just one year, the board foot cost of lumber traded under $300 per 1,000 board feet and just this past Friday it topped over $1,600 per one thousand board feet. This translates to an average price increase of over $35,000 to the average home according to the National Association of Home Builders. What may be the saddest part of this story is that these substantial price increases have made affordable housing practically non-existent and has put the dream of homeownership for first time buyers out of reach.
But, like anything, there will be and end to it. Prices may not normalize or drop to lower, pre-boom levels but they will stop increasing. It is simply a matter of supply. Once manufacturers can produce a level of supply that will meet or exceed the demand, then we will see pricing stabilize and level off. If historical pricing patterns prevail, we may be paying $10 for that 2 x 4 indefinitely into the future, as these higher prices will settle in to become the new normal.